'Extraordinarily challenging quarter': Origin share price lifts despite $2.2b write down

The company's APLNG revenue looks to have doubled in financial year 2022.

| More on:
Worker inspecting oil and gas pipeline.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • The Origin share price is gaining on Friday, lifting 3.4% to trade at around $5.90 
  • That's despite the company recognising a $2.2 billion non-cash impairment charge for its Energy Markets business 
  • The company also expects its full year APLNG revenue to increase 103% in financial year 2022 

The Origin Energy Ltd (ASX: ORG) share price is in the green today amid the release of the company's quarterly report.

The energy provider is also in the headlines today amid news its $17 million fine made up the bulk of penalties handed out by the Australian Energy Regulator (AER) in 2021-2022.

After opening 1.5% higher at $5.79, the Origin share price has continued on the up-and-up. At the time of writing, the S&P/ASX 200 Index (ASX: XJO) energy provider's stock is swapping hands at $5.895. That marks a 3.42% gain.

Origin share price gains on 'extraordinarily challenging quarter'

  • Australia Pacific LNG (APLNG) revenue increased 6% on that of the March quarter to reach $2.58 billion
  • Domestic gas sales lifted 4% quarter-on-quarter
  • APLNG's realised oil price excluding hedging came to $117 a barrel last quarter
  • North Asian LNG market prices delivered averaged US$31 per million British thermal units (mmbu)
  • APLNG average realised gas price was $16.43 per gigajoule
  • Energy Markets non-cash impairment of $2.2 billion recognised

The company revealed a $2.2 billion write down for financial year 2022. It was due to a $4.4 billion increase in the value of associated in-the-money Energy Markets derivative assets in financial year 2021.

The value of the business is assessed independently and doesn't consider hedging benefits.

Origin said the impairment will only impact goodwill, bring no tax impact, and doesn't reflect the business' performance of future value.

The company also revealed it received $1.6 billion of cash distributions from APLNG last financial year. It expects its full year revenue to lift 103% on higher commodity prices.

What else happened in the June quarter?

The major news from the company last quarter came when it scrapped financial year 2023 guidance for its Energy Markets business, citing extreme volatility. The Origin share price fell 14% on the back of the announcement.

Origin was also fined after it was found to have breached its hardship policies. Today, the AER revealed it only secured around $35 million of fines in 2021-2022. The ASX 200 energy retailer received the bulk of such penalties with its $17 million fine.

And of course, the company pushed through a dramatic June as the Australian Energy Market Operator (AEMO) switched off the energy spot market in all regions of the National Electricity Market in a bid to avoid blackouts.

The company said the average spot electricity price for the June quarter was $276 per megawatt hour. That was up from $91 per megawatt hour in the March quarter.  

What did management say?

Origin CEO Frank Calabria commented on the results driving the company's share price today, saying:

In an extraordinarily challenging quarter for the energy industry globally and in Australia, with elevated commodity prices and significant power supply challenges across the NEM, I'm very pleased with how the business has helped meet the energy needs of customers.

Australia Pacific LNG has continued to play an important role in providing secure supply to customers on Australia's east coast, increasing gas supply to the domestic market by 4% in the June quarter.

What's next?

Origin hasn't provided any new earnings guidance today. However, it did note progress on coal contracting to Eraring Power Station for financial year 2023.

The company has now contracted 3 million tonnes of its target of 5 million to 6 million tonnes.

It's also on track to migrate all electricity and gas customers to the Kraken platform by the end of the year.

Origin share price snapshot

The Origin share price has been outperforming in 2022 so far.

It has gained 9% year to date, leaving it outperforming the ASX 200 by 17%.

It has also lifted 31% over the last 12 months while the index has dumped 6%.

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Earnings Results

Bank building with the word bank in gold.
Earnings Results

4 ASX 200 bank shares with earnings updates next week

Three of Australia's 'Big Four' banks plus a regional bank will report to the market next week.

Read more »

Mini house on a laptop.
REITs

2 ASX 300 property shares up big today

Investors seemed to like one earnings report more than the other.

Read more »

Ecstatic woman looking at her phone outside with her fist pumped.
Earnings Results

2 ASX All Ords shares soaring on strong full year results

These shares are making their shareholders smile on Friday. Let's find out why.

Read more »

Woman and man calculating a dividend yield.
Earnings Results

Why did the AMP share price just crash more than 13%?

AMP shares are taking a beating on Friday. But why?

Read more »

Three smiling corporate people examine a model of a new building complex.
Earnings Results

2 ASX 300 REITs charging higher on results day

These property companies have released their latest results. Here's what they reported.

Read more »

A businesswoman exhales a deep sigh after receiving bad news, and gets on with it.
Earnings Results

Cochlear share price sinks 10% on half-year result disappointment

Let's see why investors are hitting the sell button this morning.

Read more »

A man in shirt and tie uses his mobile phone under water.
Share Market News

2 ASX 200 shares sinking on Thursday on earnings results

Investors are bidding down these ASX 200 shares today. But why?

Read more »

Man pointing at a blue rising share price graph.
Earnings Results

2 ASX 300 shares rocketing 6% today

Investors love what these two stocks just reported.

Read more »